Malaysia has a financial regulatory authority called the Securities Commission (SC). As the regulator of the capital market in Malaysia, the SC is directly responsible for the regulation of all licensed persons and firms. Its duties include encouraging the development of the securities and derivatives markets, monitoring public-listed companies and ensuring compliance with securities laws.
The statutory authority oversees conventional and Islamic banking institutions. It also regulates the Takaful insurance industry. The Takaful Act of 1984 outlines its duties and responsibilities. In addition, each Islamic bank must have a Sharia Advisory Board. This body is overseen by the BNM and advises the government on the Islamic banking industry.
The BNM has also announced the approval of a policy document for digital banks, which aims to create a more stable and efficient financial system. This document sets minimum standards for DFIs and will help prevent them from exploiting weak links within the interconnected system. The BNM intends to issue up to five digital bank licences. The guidelines also stipulate the capital funding requirements for each licensee.
The Acts also require that the Minister or BNM must approve financial institution acquisitions. If the shareholding of one individual is more than 50%, the Minister must approve the transaction. If it is less than 50%, the BNM must approve the acquisition of the business. In some cases, the BNM may also dispose of an institution’s assets.
The Financial Services Act also includes similar provisions for the Islamic and conventional financial sectors. The IFSA is a key law that allows Islamic financial institutions to compete in Malaysia. To operate in Malaysia, a foreign institution must obtain an IFSA license. Foreign insurance companies can also operate under the laws of Malaysia, as long as they comply with IFSA regulations.
The Central Bank of Malaysia is the government’s financial regulator and is responsible for overseeing the banking sector. Its primary goals are to ensure the financial stability of the country and develop a progressive financial sector. It advises on macroeconomic policies, manages public debt, and manages the country’s international currency reserves. It also regulates financial institutions, supervises payment systems and oversees foreign exchange markets.
The Malaysian government has been supportive of fintech innovation and has a special group called the Financial Technology Enabler Group (FTEG). FTEG seeks to create a regulatory environment that is conducive to fintech deployment. The FTEG was set up in June 2016 and works to facilitate technological innovation and testing within the financial services sector. Through the FTEG, Fintech companies can test new technologies in a live environment.
As Malaysia has become increasingly digital, e-commerce has revolutionised the retail payment landscape. The Malaysian Financial Regulatory Authority has issued guidelines on e-money and has been actively pursuing industry adoption.